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Fed Survey Shows Growth in Mobile Banking, Payments

smartphoneAmericans are increasingly using their mobile phones to access bank accounts, credit cards, and other financial accounts, according to the Federal Reserve Board's latest report on mobile financial services.

As of November 2012, 28 percent of all mobile phone users and 48 percent of smartphone users had used mobile banking in the past 12 months, according to the Fed survey, Consumer and Mobile Financial Services 2013. That share represents a significant increase from 21 percent in December 2011 for mobile phone users and 42 percent for smartphone users. While less common, the use of mobile phones to make payments at the point of sale increased threefold over the same period, as 6 percent of smartphone owners reported using their phone to make a purchase.

Mobile devices have increasingly become tools that consumers use for banking, payments, budgeting, and shopping. The Board's report examines how consumers access their bank's services using mobile phones (mobile banking), how they pay for goods and services with mobile phones (mobile payments), and how they use mobile phones to inform shopping decisions.

Mobile banking popular with underbanked
The use of mobile financial services is particularly prevalent among the 10 percent of the population that is underbanked, which refers to people with bank accounts but who also use check cashers, payday lenders, or payroll cards. Among the 90 percent of underbanked consumers with mobile phones, 49 percent had used mobile banking in the 12 months before November 2012, up from 29 percent in December 2011. Mobile phones may also allow for the extension of financial services to an additional 10 percent of the population that is unbanked, or has no bank account, as 59 percent of this group has a mobile phone, half of which are smartphones.

While the use of mobile banking increased a third between 2011 and 2012, the report indicates that many consumers remain skeptical of the benefits of mobile banking and the level of security associated with the technology. More than half of mobile phone owners who do not use mobile banking say they have no interest in using this technology. Consumers are similarly skeptical of the benefits and security of mobile payments or believe it is simply easier to use another method of payment. Less than one-fourth of all mobile phone owners expressed an interest in using their mobile phones to buy things at the point of sale.

Consumers are rightly concerned about the security of mobile payments, said Mary Kepler, a vice president and executive director of the Atlanta Fed's Retail Payments Risk Forum. Today's smartphones pack roughly the computing power of desktop computers from just a couple of years ago. With that power also come the same risks of malware and intrusions that threaten personal computers, yet many smartphone users are not as careful in using that device as they would be using a desktop or laptop computer, Kepler pointed out. As safe computing practices lag the technological power of smartphones, she added, it only raises the risks of unsafe computing.

The value is in the data
Kepler cited another significant finding of the survey regarding payments. "The value is in the data," she said.

Merchants can gather a great deal of information about the shopping patterns of consumers who pay using mobile devices, she noted. Likewise, consumers use their smartphones to receive discount offers from merchants. And 42 percent of smartphone users in the Fed survey said they have used their phone to comparison-shop while they were in a store, another example of the data being perceived as more valuable than the actual act of making a payment with a mobile device, Kepler said.

The Federal Reserve Board completed its first such survey of consumers' use of mobile financial services in December 2011, and released a summary report in March 2012. The Board conducted a second survey in late November 2012 to monitor trends in the use of mobile financial services and to understand how the rapidly expanding use of this technology affects consumer decision making and the overall economy.

April 17, 2013


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